Argentina’s economy, which is one of the more powerful in the region, is dependent on services and manufacturing, although agribusiness and ranching dominated the economy for much of the 19th and 20th centuries. Argentina still produces more grain than any other country in Latin America and is second in cattle raising only to Brazil, and its receipts from tourism are second in the region only to those of Mexico. Its gross national product (GNP), GNP per capita, and value added from manufacturing are also among the highest in the region. However, the country has withstood a number of economic downturns, including periods of high inflation and unemployment during the late 20th century and a major financial crisis in the early 21st century.

In the 60 years after the founding of the farming colony at Esperanza in 1856, the base of Argentine agriculture shifted from livestock to crops. The spread of wheat, corn (maize), and flax cultivation roughly conformed to that of the estancia region of the Pampas. Although agriculture there did not become as intensive as it did in North America, soils were good and land was abundant. Argentine industry became important when mostly foreign-dominated manufacturers began exporting processed foods. The growth trend continued well into the 20th century as Argentina became one of the most prosperous countries in Latin America. Meat and grain were exported to expanding markets in Europe in exchange for fuel and manufactured products.

In the early decades of the 20th century, Argentina became the world’s leading exporter of corn, flax, and meat. However, the Great Depression of the 1930s considerably damaged the Argentine economy by reducing foreign trade. Between 1930 and 1980 Argentina fell from being one of the wealthiest countries in the world to ranking with the developing (Third World) less-developed nations. In response to the Great Depression, successive governments from the 1930s to the ’70s pursued a strategy of import substitution designed to transform Argentina into a country self-sufficient in industry as well as agriculture. This was accomplished mainly by imposing high tariffs on imports and thereby sheltering Argentine textile, leather, and home-appliance manufacturers from foreign competition. The government’s encouragement of industrial growth, however, diverted investment from agriculture, and agricultural production fell dramatically. Fruits, vegetables, oilseed crops such as soybeans and sunflowers, and industrial crops such as sugarcane and cotton increased their share of total agricultural production at the expense of the dominant grain crops. Overall, however, Argentina remained one of the world’s major agricultural producers.

By 1960 manufacturing contributed more to the country’s wealth than did agriculture. Argentina had become largely self-sufficient in consumer goods, but it depended more than ever before on imported fuel and heavy machinery. In response the government invested heavily in such basic industries as petroleum, natural gas, steel, petrochemicals, and transport; it also invited investment by foreign companies. By the mid-1970s Argentina was producing most of its own oil, steel, and automobiles and was also exporting a number of manufactured products. Manufacturing became the largest single component of the gross domestic product (GDP). The country had also become self-sufficient in fuel.

The era of import substitution ended in 1976 when the Argentine government lowered import barriers, liberalized restrictions on foreign borrowing, and supported the peso (the Argentine currency) against foreign currencies. At the same time, growing government spending, large wage raises, and inefficient production created a chronic inflation that rose through the 1980s, when it briefly exceeded an annual rate of 1,000 percent. Successive regimes tried to control inflation through wage and price controls, cuts in public spending, and restriction of the money supply. With the peso quickly losing value to inflation, a new peso was introduced in 1983 (with 10,000 old pesos exchanged for each new peso), only to be replaced by the austral in 1985, which was in turn replaced by another new peso in 1992.

The measures enacted in 1976 also produced a huge foreign debt by the late 1980s, which became equivalent to three-fourths of the GNP. In terms of percentage of GDP, the country’s agricultural and industrial sectors were similar to those of developed countries, but they were considerably less efficient. And, despite a high standard of living by South American standards, Argentina had a foreign debt ratio comparable to that of Third World less-developed countries.

In the early 1990s the government enacted a program of economic austerity, reined in inflation by making the peso equal in value to the U.S. dollar, and privatized numerous state-run companies, using part of the proceeds from their sale to reduce the national debt. The resulting influx of foreign capital and increased industrial productivity helped to revitalize the economy. In 1995, however, a sudden devaluation of the Mexican peso threatened the economies of many Latin American nations. Argentines feared that investors who had lost money in Mexico would also lose confidence in the Argentine financial system. To avert that threat, the government quickly adopted further austerity measures. However, a sustained recession at the turn of the 21st century culminated in a financial crisis in which the government—led by a quick succession of presidents and presidential resignations—defaulted on its foreign debt and again devalued the Argentine peso. By the middle of the first decade of the 21st century, however, the country’s economy had recovered; there was considerable GNP growth, renewed foreign investment, and a significant drop in the unemployment rate.

Agriculture, forestry, and fishing

Argentina is one of the world’s major exporters of soybeans and wheat, as well as meat. It is also one of the largest producers of wool and wine, but most of its wine is consumed domestically. Although agriculture is an important source of export earnings, it now accounts for a small percentage of the overall GDP, and it employs only a tiny portion of the nation’s workforce.

Wheat is Argentina’s largest crop in harvested land area, and it is the main crop in the cattle-raising southern Pampas of Buenos Aires and La Pampa provinces. Wheat and corn (maize) dominate in the north. Planting of corn and wheat began simultaneously in the northern Pampas. By the end of World War II, however, foreign competition had cut Argentine corn production in half, and production has increased only gradually since then. About half of the corn produced is used for livestock feed. The total area of the Pampas planted in sorghum and soybeans has grown since 1960 to rank just behind that of wheat and corn. These crops also serve primarily as livestock feed and are valuable for export. Another crop of the northern Pampas is flax.

More than nine-tenths of the country’s grapes are planted in the Northwest provinces of Mendoza and San Juan; most of the crop is used for wine making. Table grapes are a specialty in La Rioja. The warmer northern provinces of Tucumán, Salta, and Jujuy make up the sugarcane-growing region of Argentina. The sugarcane provinces also have citrus orchards, which were introduced as a safeguard against the volatility of the sugar market. Tobacco is also grown in Salta and Jujuy. The best area for cotton growing lies mainly west of the Paraná River, between the Bermejo and Dulce rivers. Most of the crop is used by the Argentine textile industry.

In Mesopotamia maté is the most important product of Misiones province, although since 1940 farmers have increasingly cultivated tea, tung trees (from which tung oil is derived), and citrus crops. Farther south in Mesopotamia, the truck-farming area supporting Buenos Aires, oranges, grapefruit, mandarins, and numerous vegetables are grown. The Negro River irrigation district in Patagonia has become one of Argentina’s major fruit-producing regions, particularly for apples and pears.

The Pampas are the traditional source of beef cattle, the country’s most valuable export commodity. Estancieros have proved quick to adapt to changing markets, switching breeds and supplementing alfalfa feed with grain sorghum in order to produce leaner meat. Most of Argentina’s hogs are raised in the Pampas, principally for domestic consumption. The cool, moist area of the southeastern Pampas, between Buenos Aires and the city of Mar del Plata, is an important dairy and sheep-raising district. Corrientes and Entre Ríos remain important cattle-raising provinces, ranking just behind those of the Pampas. Chaco province began as grazing ground for criollo cattle, but modern breeds have been susceptible to disease there, so the Chaco cattle economy has remained underdeveloped. Patagonia has at least half of the country’s sheep, most of which are sheared for their wool. For a period during the 1990s, Argentine beef was banned from importation into the European Union, the United States, and other nations because of the incidence of foot-and-mouth disease. Exports subsequently resumed but were subject to periodic bans. Most of the beef produced in Argentina is now eaten locally.

The forestry industry does not supply all of Argentina’s needs. Most of the harvest is used for lumber, with smaller amounts for firewood and charcoal. In Mesopotamia the Paraná pine is harvested for its timber; there are also plantations of poplar and willow. The Northwest highlands produce pine and cedar, used for pulp and industry. The red quebracho of the Chaco region is valuable for its tannin, and the white quebracho is used for lumber and charcoal. Scattered stands of algaroba (carob) provide local firewood and cabinet wood in the Pampas.

The fishing industry is comparatively small, owing in part to the overwhelming preference among Argentines for beef in their diet. Most coastal and deep-sea fishing is done in the Buenos Aires area, from the Río de la Plata to the Gulf of San Matías; the major ports are Mar del Plata and Bahía Blanca. Hake, squid, and shrimp make up a large part of the catch, about three-quarters of which is frozen or processed into oil and fish meal for export.

Resources and power

Argentine industry is well served by the country’s abundance of energy resources. By the late 20th century the country was self-sufficient in fossil fuels and hydroelectric generation, and it had become a petroleum exporter. Oil deposits are concentrated mainly in the Northwest and in Patagonia. The basin around the Patagonian port of Comodoro Rivadavia is estimated to hold some two-thirds of the country’s onshore reserves. Other deposits are located in Jujuy and Salta provinces, in Mendoza and Neuquén provinces, and at the tip of Patagonia and Tierra del Fuego. The main natural gas fields are also in the Northwest, near Campo Durán (Salta province) and Mendoza, and in Patagonia, near Neuquén and Comodoro Rivadavia. Prior to the development of these fields in the 1980s, Argentina had imported gas from Bolivia. Coal deposits are found in southern Patagonia. Until 2000 some coal was mined there, but that activity has ceased; Argentina’s needs are met by imports.

With the exception of oil and natural gas, exploitable mineral reserves are generally small and widely scattered. Deposits of iron ore, uranium, lead, zinc, silver, copper, manganese, and tungsten are worked. A wide range of nonmetallic minerals is found throughout the country. Salt deposits are located on the western and southwestern edges of the Pampas, and materials such as clay, limestone, granite, and marble supply the construction industries.

A significant amount of electrical power in Argentina is generated through hydroelectric stations, the total capacity of which has increased exponentially since the early 1970s. The huge Yacyretá dam on the lower Paraná River, brought on line in 1994–98, gave the nation a surplus of generating capacity. Argentina, with several nuclear plants, is one of Latin America’s main producers of nuclear power.

Manufacturing

Manufacturing, which accounts for about one-fifth of GDP and nearly one-sixth of the workforce, is a mainstay of the Argentine economy. A large sector of the country’s industry is involved with the processing of agricultural products.

Agribusiness

Beef initiated industrialization in Argentina. The success of beef came as refrigeration techniques were perfected to allow, after 1876, for the storage and shipment of fresh meat. By the late 1920s frigoríficos (meat-packing plants) were located in various parts of the country, several of them in the Buenos Aires area. Later shipments proceeded from La Plata, Rosario, and Bahía Blanca. Frigoríficos at the ports of Patagonia came to serve the sheep ranches of that region.

The growth of beef production in Argentina gave rise to a host of associated industries, including those producing tinned beef, meat extracts, tallow, hides, and leather. Argentina has been a consistent world leader in the export of hides. Leather processing occurs locally, and fine leather clothing can be obtained at retail outlets in the cities. The Chaco region supplies the necessary tannin, of which it is a major world producer.

The Argentine grain-milling industry has grown in cities along the Río de la Plata littoral, where huge storage silos were built. Grain became a significant export as production increased in the late 20th century. Wheat flour is also produced in the silo areas for local consumption, and food industries based on wheat flour and pastas have developed at the same sites. Smaller but similar activities have emerged in the interior of Argentina wherever grain has been produced. Textile production in Argentina also developed on the basis of agricultural products, namely, wool and cotton. It is concentrated in the cities of the Pampas, where the largest markets and labour pools are located.

The Argentine sugar industry of the Northwest is centred mainly in San Miguel de Tucumán, but a few mills also operate in Salta and San Salvador de Jujuy. These mills fulfill domestic demand. Mendoza in the same region is the nation’s centre for olive and olive oil production, as well as for wine bottling. Argentina exports wine to other South American countries and to Europe and North America, on the basis of a steadily improving reputation among consumers.

Oil, steel, and motor vehicles

Argentina’s refining industry has grown along the coast in Buenos Aires and nearby cities, supplied by crude oil taken there by tankers and pipelines from Comodoro Rivadavia and Venezuela. The refining industry has also found a base in the petroleum fields north and south of Mendoza, where petrochemical plants have been built.

The steel industry in Argentina began in the 1940s and grew slowly during the following decades. The Zapla works in Jujuy, the integrated San Nicolás de los Arroyos mill between Rosario and Buenos Aires, and the mill in Rosario produce most of the nation’s steel but fall short of supplying domestic demand.

A developing automobile industry provides a market for Argentine steel producers. Production had stagnated for decades, and in the 1980s it was still common to see 1960s-era cars on the streets of Buenos Aires; in the 1990s, however, foreign investment and the construction of modern assembly plants revitalized this sector. There is a developing aircraft industry at Córdoba.

Finance and trade

The economic sector that includes finance, insurance, real estate, and business services accounts for one-fifth of GDP and employs about one-twelfth of the workforce. The central bank issues currency, sets interest and exchange rates, and regulates the money supply by deciding the amount of reserve cash that banks must hold. The peso is the monetary unit.

Prior to the establishment in the 1990s of the Southern Common Market (Mercado Común del Sur; Mercosur) with Brazil, Uruguay, and Paraguay, Argentine trade was mainly oriented toward Europe and the United States. Brazil is now Argentina’s most important trading partner, representing about one-fourth of all foreign trade, followed by the countries of the European Union, the United States, Chile, Japan, and Uruguay.

In the 19th century Argentine beef and grain helped feed Britain’s rapidly rising urban population, and until 1945 Britain was Argentina’s main trading partner. The United States then assumed greater importance, particularly as an importer of Argentine goods. Britain’s share declined and virtually disappeared for a time after the Falkland Islands War of 1982.

Argentina generally has had a favourable balance of trade, although it has occasionally experienced years with trade deficits since the Mercosur pact was enacted. The country’s major exports are still agricultural products, notably grain; also important are petroleum, machinery and transport equipment, and chemicals. About half of its imports, by value, are machinery and transport equipment. Chemical products and consumer goods are significant as well.

Services

More than three-fifths of the Argentine GDP and a comparable portion of the labour force are based on services, including retail trade, hotels, restaurants, trucking and other transportation, government, education, health care, and various other business and social services. Retail and wholesale commerce alone account for about one-seventh of GDP, and business services account for a slightly lesser portion.

Tourism is growing in importance, and international visitors contribute large amounts of foreign exchange to the Argentine economy. The number of foreign tourist arrivals approached five million per year in the late 1990s; one-fourth of visitors were from Uruguay, followed by hundreds of thousands each from Chile, Brazil, the United States, and Paraguay. Major tourist sites include Iguazú Falls and the former Jesuit missions in Misiones province, as well as the ski resorts of San Carlos de Bariloche in the Lake District. Adventure travelers are drawn to Patagonia and Tierra del Fuego. Buenos Aires is often called the Paris of South America because of its European flair, its nightlife, and its many educational institutions, museums, monuments, and theatres, including the historic Colón Theatre.

Labour and taxation

Argentina possesses a large and literate workforce. However, a sizable number of Argentine workers were unemployed at the turn of the 21st century. Strong labour laws were enacted during the Perón era, when unions wielded great power over the Argentine economy, but successive governments have attempted to reform or repeal some of the Peronist strictures. More than nine-tenths of Argentina’s 1,100 labour unions are represented by the General Confederation of Labour (Confederación General de Trabajo), a Peronist organization. Dissident trade union confederations include the Argentine Workers’ Movement (Movimiento de Trabajadores Argentinos).

Women constitute more than one-third of the labour force, and about two-fifths of women labourers are employed as household servants. The number of women employed is increasing, which reflects both the necessity of two incomes to support families and an increase in the number of women heading households. Women tend to hold lower-paying jobs and to receive less pay than their male counterparts.

Taxes contribute the great bulk of government revenue. In addition to income tax, the principal federal taxes include wealth tax, value-added tax, and excise taxes on specific commodities and luxury goods. Additional taxes are levied by local and provincial governments.

Transportation and telecommunications

During the Spanish colonial period there were three principal overland transportation routes. The most important led from Buenos Aires to the wealthy mining centre in Upper Peru (now Bolivia) via the northwestern route through Córdoba, Santiago del Estero, San Miguel de Tucumán, and San Salvador de Jujuy. A second route linked Buenos Aires with Chile westward through Villa María, San Luis, and Mendoza. The third route extended north from Buenos Aires to Santa Fe and Corrientes. These and less-important side roads were used by mule drivers, horsemen, huge two-wheeled oxcarts called carretas, and stagecoaches drawn by teams of six to eight horses.

The system was transformed not by modernizing the roads but rather by rapidly building rail lines during the period just after 1857. British and other foreign capital funded rail networks that radiated from Buenos Aires. Rail construction continued from that time into the 20th century, and the country developed the most extensive rail system in Latin America. After the railways expanded, the nation built up its road network. Argentina’s roadway mileage is now outranked in Latin America only by Brazil and Mexico; nearly one-third of the roads are paved. The largest share of surface freight is now carried by road, with lesser amounts carried by river and railroad.

Small ships that carry passengers and freight have served the coastal cities from Buenos Aires to Río Gallegos since the end of the 19th century. The ocean shipping fleet is not well developed, however, considering Argentina’s extensive export trade. Airlines link all regions of the country. Every major city has an airport, and even small, remote centres such as Ushuaia in southern Patagonia have reliable air service. Nearly all the largest cities have international airports, the most important being Ezeiza outside Buenos Aires. The country’s main air transport company, Aerolíneas Argentinas, was founded by the government in 1950 to handle domestic and international traffic. It was sold to a consortium headed by Spain’s national carrier, Iberia, in 1992 and unsuccessfully restructured in the late 1990s. The airlines returned to state control in 2008.

In November 2000 the telecommunications industry was deregulated in an attempt to open the market to competition, improve the speed and breadth of services, and lower costs. Argentina was experiencing a boom in Internet start-up companies, which the infrastructure was inadequate to support. By 2000 fewer than 10 percent of the people owned personal computers, and less had Internet access, but the numbers for both were growing rapidly. The two extant regional telecommunications companies, Telecom and Telefónica, in 1989–90 had replaced the state-owned Entel company, which was notorious for decade-long waits for installations. The system subsequently was modernized, with extensive fibre-optic lines installed throughout most of the market and service made available to remote locations. Cellular service was expanding as well, approaching the rate of traditional landline service.